We are solution based. Let’s get to it…
MORTGAGES
Did you purchase a home in January 2022 or know someone that did?
The best rate was towards the end of 2021/early 2022 with the 1 year fixed at 2.79% and the variable rate at 2.15% The lowest rates ever! If you didn’t lock into a long mortgage term when you purchased, you are likely feeling some financial pressure right now.
Solutions: (These may be options that you haven’t considered.)
You could refinance, sell, or rent out the current property and purchase something more affordable perhaps with a secondary unit.
You did lock in at the lowest rate and took a 5-year term. You might want to “move up” and take/port their mortgage with you.
You could make up the difference with additional cash or you could increase your old mortgage and do what is commonly referred to as “extend and blend”. This means you would commit to extending to what was the initial term or longer and pay the current rate on the additional money borrowed. You would still have a great rate overall with more houses than they could have afforded a couple of years ago.
LANDLORDS
Residential landlords who own rental property built before November 15th, 2018.
These properties are subject to rent control in Ontario. Many owners are unhappy with the increasing gap between what they’re getting for rent and what the market rent really is. Over the last 5 years, allowable rent increases have averaged 1.54% per year leaving landlords unhappy with the increasing gap between what they’re getting for rent and what the market rent really is.
We’re seeing a few trends in this segment of the market.
- Rents have increased so quickly that we’re seeing a trend where landlords are selling these properties and repurchasing another investment where they have the ability to charge market rent.
For example, a 2-bedroom condo in Milton which was rented for the last 6 years at $1700 +/- month with actual market rent at $2900/mo. This is common right now. Investments are underperforming AND rents aren’t keeping up with debt obligations tied to higher mortgage rates. To further drive the point home, I would add that $1700/month + 1.54% annual rent increase only amounts to $26 per month.
- Residential landlords are opting to give notice to their tenants and either move into their investment properties themselves or have their immediate families do so.
Note: This option isn’t available for landlords who hold their property in a corporation. When this is the case, many landlords are opting to sell and buy something else.
RESIDENTIAL TENANTS
Tenants paying substantially under market rent run a higher risk of having to move.
Because…
- Landlords want to keep up with current rental market rates
- Personal landlords can give notice and move in
- Personal and corporate landlords can opt to sell
And…
- Investor buyers won’t want to buy a property bringing in rental income that’s too far off from market rent
- This limits the market to buyers who want to move in themselves and give notice to the current tenants to vacate.
If paying closer to market rent isn’t an option, then you really should start thinking about buying. You could try to buy the one you are currently renting or find something else that would work for your budget.
Written by:
Tanya Fernandes
Broker | Owner
